LOGISYM MAGAZINE DECEMBER 2016 / JANUARY 2017 | AIR FREIGHT IN 2017
Air Freight 2017
Should Airfreight be
considered as part of
your global Supply Chain
strategy in 2017?
The answer is a resounding
yes!
Shipping be it Air, Ocean, Road
or Rail, is vital to the everyday
life of the average consumer
and in the ever changing world
of commerce. As technology in
this area continues to evolve
and develop rapidly, the
transportation industry must
change and adapt as well in
order to meet increased demand
for faster delivery times.
Of all modes, Airfreight is
probably the mode where this
is most relevant. If however
the implementation and
adoption of the e-AWB is
used as a yardstick, this is far
easier said than done. From
27
personal experience, 3PL’s and
to some extent even carriers
are still hampered by legacy
technologies from 30 or 40 year
old systems and are unable
or unwilling to break free of
these outdated and antiquated
shackles.
Disappointing 2016
Reports from many 3PL’s are
coming in that 2016 has been a
disappointing year for airfreight
as economic and political
uncertainty have increased this
year.
One of these topics has been
the Trans Pacific Partnership
(TPP). Everyone is still uncertain
to what will happen to the TPP
when Trump takes office this
month. Many are of the opinion
that it will not be ratified. As
many know, the TPP aims to
provide a platform for wider,
regional economic integration,
and supports the foundation
for a free trade agreement of
the Asia Pacific. This would
give the initial 12 countries the
opportunity to shape future
trade liberalisation in the Asia
Pacific region and promote
the growth of regional supply
chains and give them better
access to globally significant
markets. It will diversify trade
and investment relationships,
and provide a platform to build
on the goods and services
exported to TPP countries.
China is of course taking full
advantage of this void that will
exist – or rather continue to
exist and have not been sitting
on the sidelines during TPP
 28 LOGISYM MAGAZINE DECEMBER 2016 / JANUARY 2017 | AIR FREIGHT IN 2017
negotiations. Along with 15
other countries, China has been
negotiating a region-wide trade
deal since early 2013, covering
around 50% of the world’s
population and 30% of global
GDP.
The Regional Comprehensive
Economic Partnership (RCEP),
a less ambitious treaty than
TPP, which aims to tackle some
highly sensitive aspects of
trade, finished its 15th round of
negotiations in November.
While the China-excluded TPP
is facing uncertainties after the
U.S. election, some countries
like Australia are already
signaling they would support a
China-led regional trade deal,
and as they are prone to do,
China will certainly use this to
their advantage.
Oceanfreight was certainly
affected by the challenges.
In 2016 we saw the collapse
of Hanjin Shipping and just a
couple of months ago, Japan’s
big three shipping majors – NYK,
K Line, decided to end decades
of fierce rivalry and merge their
container shipping businesses
into a new line (a new joint-
venture company) with a total
capacity of 1.4m TEU’s , which
would rank as the sixth largest
in the world and have a global
market share of approximately
7%
Global trade has been fairly
stagnant since 2014 and air
cargo a derived demand of
trade has felt the pinch. Growth
has been minimal in recent
years and 2016 was no different
as demand for air freight slid in
several markets all around the
world.
According to IATA (the
International Air Transport
Association), jet fuel prices in
the last year have dropped
17.8 percent. While the jet
fuel price drop is noticeable,
many shippers have developed
efficient practices utilising other
modes of transportation and
may struggle to be convinced
that the air cargo market will
remain advantageous enough
to justify increasing usage.
Technology as the enabler
Despite this lackluster
performance, it is certainly
not all doom and gloom for
Airfreight in 2017. Technology
will continues to play an
increasingly critical role in
the day-to-day operations of
companies all over the world.
IoT
The Internet of Things (IoT) is on
its way to providing the world
with more connectivity than
ever before, and the effects are
being felt in the transportation
industry with the increased
usage of technologies like RFID
tags. The importance of high
quality and efficient inventory
and communications systems
continues to rise as companies
seek to optimize supply chains
and minimize lead times.
Looking ahead, 2017 has a great
chance of being a prosperous
year full of growth and
innovation that will most likely
set a new precedent for speed
and quality in the transportation
industry.
e-Commerce
e-Commerce continues to
grow as more and more people
elect to shop online from the
comfort of their own home or
on mobile devices while they
are on-the-go. This trend has
led to the need for innovation
by companies and shippers to
ensure their supply chains are
able to meet the time and place
expectations of their customers.
As e-Commerce becomes more
commonplace in developed
economies, air cargo has an
opportunity to resurface as a
viable mode of transportation
despite soft demand. A tough
2016 has stifled the optimism
of many but airlines and
manufacturers have been hard
at work to find a way for air
cargo to mirror the relatively
robust growth in passenger
traffic.
Aside from the BIG 5 – China,
USA, UK, Japan, and Germany
– a number of regions and
countries are poised to
become major players in the
e-commerce market.
According to DHL eCommerce
CEO Charles Brewer, they are
positive about the e-commerce
potential of three regions in
 30 LOGISYM MAGAZINE DECEMBER 2016 / JANUARY 2017 | AIR FREIGHT IN 2017
2017 and beyond.
“The massive growth of
e-commerce will extend past
the BIG 5 to take in Southeast
Asia, Latin America, and the
Middle East and Africa. Markets
that, despite their ’emerging’
status, are fast becoming hot
e-commerce properties”.
“
The massive growth
of e-commerce will
extend past the BIG 5 to
take in Southeast Asia,
Latin America, and the
Middle East and Africa.
Markets that, despite their
’emerging’ status, are fast
becoming hot e-commerce
properties
Charles Brewer
CEO
DHL eCommerce
The exponential growth of
e-commerce transactions is
mind boggling and whilst it is
easy to take for granted how
web savvy we have become,
we should not overlook the fact
that some markets are still a lot
less mature than others. Given
the reach and applications,
opportunities still abound in
both the more developed and
less-developed markets and
3PL’s and Airfreight in particular
should leverage on this huge
opportunity.
Southeast Asia for example,
a market with more than 620
million consumers, is primed
and ready. Taking some of the
lessons learned from more
mature e-commerce markets
to heart and is leap-frogging
from the traditional first step
C2C platforms straight to
mobile. Thanks to its early
digital adoption, e-commerce
revenues in the region are set to
exceed $25 billion by 2020.
e-AWB
I mentioned at the start of
this article that uptake has
not been as rapid as hoped.
By any measure though, what
has been achieved so far is
still quite impressive given
that full adoption requires
Customs, airlines, forwarders
and ground handlers to all work
collaboratively together.
In November, IATA announced
a number of supporting
initiatives for 2017 to address
the e-AWB adoption challenges
and to sustain the growth in the
penetration rate:
• Expand number of trade
lanes where e-freight and
e-AWB are possible: continue
the government supported
e-freight initiatives in key
locations
• Harmonize e-AWB procedures
in key airports across airlines/
handling agents: complement
the list of SOPs at e-airports,
especially at airports to be
included in the 2017 eAWB360
roadmap
• Facilitate adoption by SME
forwarders: launch on November
8th, 2016 of an e-AWB desktop
solution (eAWBLink) • Provide
implementation guidance
and materials: develop an
implementation playbook to
support the adoption of e-AWB
• Coordination efforts of industry
in key e-airports: strengthen the
e-AWB penetration rate in the
existing eAWB3060 airports and
deploy eAWB360 initiatives at
additional airports.
A stronger 2017
In a recent press release, IATA
announced that it expects
the global airline industry to
make a net profit in 2017 of
$29.8 billion. On forecast total
revenues of $736 billion, that
represents a 4.1% net profit
margin. This will be the third
consecutive year (and the third
year in the industry’s history) in
which airlines will make a return
on invested capital (7.9%) which
is above the weighted average
cost of capital (6.9%). This is
for both passenger and cargo
volume.
IATA revised slightly downward
its outlook for 2016 airline
industry profitability to $35.6
billion (from the June projection
of $39.4 billion) owing to slower
global GDP growth and rising
costs. This will still be the highest
absolute profit generated by
the airline industry and the
highest net profit margin (5.1%).
 LOGISYM MAGAZINE DECEMBER 2016 / JANUARY 2017 | AIRFREIGHT IN 2017 31

Expected higher oil prices will
have the biggest impact on the
outlook for 2017.
According to IATA, there is some
optimism over the prospects
for the cargo business in 2017.
The break in falling yields and
a moderate uptick in demand
(3.5%) will see cargo industry
volumes reach a record high
of 55.7 million tonnes (up from
53.9 million tonnes in 2016).
Industry revenues are expected
to rise slightly to $49.4 billion
Just like anything in business something for Logisticians to
today, challenges exist, but from ensure are included in their
the challenges, opportunities Supply Chain plans in the year
present itself to nimble and ahead.
creative approaches. Airfreight
is no different and is certainly
Raymon Krishnan
President
The Logistics & Supply Chain Management Society
Raymon Krishnan has over twenty years of experience in the Logistics industry as an end user
and service provider. This experience includes senior management, government linked and
academic positions in a variety of international companies and institutions based in Asia, the
US, Europe and Australia.

(still well below the $60 billion
level of annual revenues
experienced in 2010-2014).
Raymon is currently the President of the Logistics & Supply Chain Management Society and
under his stewardship the Society has been nominated the Best Logistics Education Provider in
ASIA in 2003 &
 2004, In 2008, the Society won the Supply Chain Asia Education Award and was
again nominated for the award in 2010. This recognition was in part due to the setting up of the
region’s first and only physical warehouse training facility.

Advancing Supply Chain & Logistics knowledge,

networks and collaboration across the global, LCSMS brings
professionals and organisations together. Gain access to
the latest industry knowledge, research, white papers and
explore building opportunities with first-class training,
conferences, events and educational programs.

EXCLUSIVE MEMBERS-ONLY BENEFITS:

Monthly LogiSYM Magazine and Newsletter Certified Logistics Engineer

LogiSYM Conferences (Singapore, Malaysia, Dubai) Australia Logistics Academy Masterclass Programs

CEO Knowledge Series (Singapore, Hong Kong, Dubai) Corporate Training, Degrees and Diplomas

Industry Networking Events SCM Directory and knowledge Portals

Certified Logistics Professional Certification

KNOWLEDGE FOR ALL. ENROLL NOW FOR

Building a stronger, collaborate INSTANT MEMBERSHIP
(Enjoy exclusive members-only benefits)
industry of professionals. www.lscms.org